How CERC default feeds into broader EM concerns

China Energy Reserve and Chemical's bond default shows credit risk in China is rising and spilling over into international markets, so bond investors need to be increasingly selective.

Fears that more Chinese corporate borrowers are likely to default in the coming months and years have cranked up a notch after China Energy Reserve and Chemical CERC failed to repay its dollar bond, spreading some of the disquiet that has been rumbling onshore in China onto offshore markets.

The $350 million default, confirmed at the weekend, underscores Beijing’s determination to lance the boil of excessive debt within the country's financial system and shows the government should not be relied upon to bail out even those firms with deep ties to the state, investors told FinanceAsia.

CERC is controlled by the Beijing government and by...

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